In conversation with Prakash Arunkundrum at Logitech

Hi Tom, great. It's great to be here.

Yeah. So as you know, as a brand, a lot of people know us. But maybe I'll start with what's our purpose? Our purpose is to create and design experiences so folks around the world can actually enjoy life more, right? That's our purpose. And if you think of what we do, we came from a legacy of making PC peripherals, which are things like mice and keyboards that attach to a PC. And over the years, we've actually started doing other things in gaming, things that I'm using now with this camera and this headset, which is actually attaching to a video device, and many others where people are creating and consuming content online. We provide the tools to make that happen. And if you really think about all of those, those things have shifted from the PC to the cloud, and really we think of ourselves as a cloud peripherals company for that reason. And we live in sort of unusual times. We're doing this call; we probably would do this live face to face, Tom, if it was a different time. And fortunately, I hope the people who are on this call, I'm really thankful for the doctors and teachers who actually made this possible for us to be here to be able to enjoy this moment with the COVID crisis going on. And so really, Logitech, I think just to come back to your question on cloud peripherals, we do four things, right? We enable people from creativity and productivity perspective with tools like the mice and keyboards and headsets and others. From there, allowing people to play games and really helping from a gaming perspective, and from there also helping with video interactions like the one we are just having and allowing people to actually stream and create content and consume music. So those are kind of our verticals that we operate in. And coming through the COVID crisis, all of those obviously have somewhat accelerated, as you've probably seen. We're doing more video, I'm sure you are. I'm doing more video than I ever did before, and that's starting to happen. So that's cloud peripherals as Logitech. And what have we been focused on? We've been focused on sustainability for many years, and as a company that truly cares about the impact of our experiences on people, this is something that's very core to our mission and purpose.

Yeah, so that's a real head-scratcher for a lot of people. I'll just tell you, I came into this role, as you pointed out from my background, I was in management consulting prior to this. I came into this role looking at the margin of our products and actually making sure that we make good impact from a revenue and growth perspective, of course, and that's all the things that you think of when you think of operations. But one of the things that an operations team does is actually impact in the factory. So I've walked, I don't know how many factories, a lot of factories all over the world. And Tom, every time I walk through one of these factories, it kind of hits you. The scale at which you do things hits you, and the ability for us to actually have impact there is super real because you make a physical thing and you make lots of them, and if you could make them better, you could actually impact sustainability in a big way. So that's a big part of my personal drive. And more importantly, I think for us at Logitech, we've talked about this idea of pervasive sustainability. What that is, is really that we want to have everyone as part of our operations — be it people doing sourcing, people in manufacturing, people designing our products, folks looking at how we market our products — all of them have a role to play in how we, as a community and as a society, impact sustainability, especially at a company like Logitech that's woven into the fabric of operations. So that's really been the reason why my CEO and the board staffed me to actually look at sustainability and make it an integral part of who we are as a company. I'll also say, one of the things that is probably not obvious to a lot of people is sustainability actually helps costs because you do less in general. When you start with sustainability, the first thing you do is reduce. And what do you do when you reduce? If you imagine you had a big box of something that was shipping, now you just made it a smaller box. Right off the bat, it's better for the environment. It's actually cheaper to make a smaller box than a bigger box, and it's actually more efficient to ship it. It actually is less carbon to ship it. Smaller boxes are less carbon than bigger boxes. So it's actually helped us in a lot of different ways to reexamine how we operate and how to really make it possible from an implementation perspective. So that's one of the reasons why an operations guy like me is heading up sustainability. I care about it deeply, and I think our management team does, and we have a real way to impact it through our operations, right? And that's been really exciting to see.

Yeah. So we've been a company, I'd say, who've been doing a lot of things on sustainability very quietly, super quietly for many years. And now you're starting to hear a lot about it, right? We've been publishing our sustainability report for a long time. We've been doing a lot of things on hazardous substances and PVC-free cables and things of that sort that we've just been quietly at it. And there's a saying within Logitech: 'We just do the right thing.' And we've been doing that. We've been doing the right thing in terms of sustainability. But we really saw the opportunity as part of Alistair, who actually heads up our design team, to rethink how we make products from the get-go. So as an example, we had a gaming mouse which is now the G Pro Wireless Gaming Mouse, which is used by pro gamers. And if you think of pro gamers as probably the most picky users — not like you and me, Tom, because they are the most picky users — we made the G Pro Wireless mouse better performance, better sensors, better everything from a performance standpoint. But along with that, when we designed it, we designed it to have lower carbon. And how did we do that? We made it with thinner walls so it's lighter. We redesigned the sensor in the product itself to have lower power consumption. We looked at the mechanical structure to optimize for the number of parts and reduce the total size of parts. We redesigned packaging. So a number of different things we did to reduce carbon, and we brought the carbon down by 20% cycle over cycle. So that's a big part of how we've been thinking about it. And of course, that stands on a big foundation of life cycle carbon analysis, without which you can't quantify. Like you said, without science-based targets, you're kind of feeling it, but you want to be able to actually tell what's the real number. And that's kind of where we started this journey, and that's sort of how we have gotten to this place. So for us, this is so integral, and that's why we think of the sustainability efforts as design for sustainability, which is really rethinking how you source materials, how you manufacture, where do you need the right type of products, where do you need the right type of components. So that's really been a big focus for us over the number of years, and you've just started hearing us talk about it more openly. And I think certainly a lot of others can learn from it.

Well, the first thing is gaming gamers, just like you said yourself, you still fondly remember it. I could see the twinkle in your eye there. Gamers are passionate folks, and we wanted to really make sure that we started with the portfolio. As you know, Logitech has a lot of different portfolios, and we wanted to start with something where the consumer is very engaged. They understand what we're doing, and we also wanted to listen to their feedback as part of what we did. So that's one. And two, it's a really big and fast-growing business for us. And that's the second big reason. And I think, you know, it builds on the foundation of who we are as a company. We came from, you know us as a mice company, but of course we do a lot of other things. We do keyboards and headsets and video and other things, but gaming came from that, from that place of birth, if you will. And that's really the reason we started with gaming. We intend to do this across everything. My ambition is to go across the board, do this across all products, not just carbon neutral but also design for sustainability, so we have impacts that we can actually reduce on the footprint we leave behind.

Yeah. So I'll make this sort of real for you because this came about because my CEO and I, Bracken, were sitting and talking about, wouldn't it be nice when you go out to shop and you buy a bag of chips and you flip it around and look at it and say, 'Oh wow, I just bought 120 calories and here's the composition of it.' You kind of have a feeling for what that is. Wouldn't it be nice if for those of us who are sustainability nerds, if I can call it that, and for those who want to actually make the world a better place, wouldn't it be nice if you actually inform consumers, 'Hey, here's the amount of carbon you're consuming from this product.' So that's really where this started. The carbon as a new calorie, if you want to think of it like that. And why did we start there? Because we felt that the consumers needed to know what amount of carbon is in the products and be really transparent about the carbon we generate in our products, and hopefully actually drive that internally as a metric to improve the amount of carbon generation over generations. So if we made a product today, we're going to tell you what the carbon is, and by definition I'm forcing myself and the rest of my colleagues to actually make a real impact that you can measure in a quantified way. So that's really where it came from: the idea of carbon transparency. So we created, we put our design folks on it, and they came up with a really cool logo. You should check it out. It's just a letter C with an arrow down showing our intent to reduce carbon over time. And we'll talk about it as part of our packaging. So it's not something that's going to be hidden away somewhere on our website; it's going to be in every package that we can as quickly as we can roll out. So that's the goal. And every one of these things stands on the foundation of this life cycle analysis capability that we've built here at Logitech over many years, without which you can't actually quantify the amount of carbon. And so that's kind of how we started this journey.

Yeah, I think maybe I'll start with what are we actually trying to accomplish? We had a pledge last year to follow the Paris Accord using the science-based targets, and really that comes from a place where we committed to a 1.5-degree centigrade world. So most of the carbon reduction that we're going to commit to comes from designing for sustainability, and we've got a number of programs in place that are coming online as we spoke about earlier. But really, until that happens, the world is actually warming as we speak, and every day we make products. So the carbon offsetting project really came from that place where we must do what we are doing for designing for better sustainability but also offset what we can right now so that carbon can get sequestered from the atmosphere. So that's really where it came from. And it's one of those things that was informed by the fact that we think the clock's ticking and the world really needs a lot more of this. So that's where it came from. Why did we pick? I'll just take Indonesia as an example. The Indonesian rainforest: Indonesia is one of the largest sources of paper pulp, which goes into packaging, which ends up in our product. So when you go out to buy a consumer electronics product which has packaging, when you open the box, it's typically trees coming from Indonesia. And our investments there are a way to keep the forest in place, protect the local community through the REDD+ programs, and actually make sure that it is supported in a climate impact way that is consistent with our values. So that's how we think about it: designing for sustainability so we can reduce carbon, and a bridge to get there through offsets while we do that. And that's really our focus.

Yeah, I think at the core of it, I could tell you it's part of the employees at Logitech and definitely the management team at Logitech. At the core, we believe that global warming is something that we must address. That's the core. I'm probably talking to you, so you're like, 'Yeah, that's obvious.' But it's somewhat obvious, but to the point that we want to dedicate our focus and efforts on this. So we have some core values in the company, and the environmental impact we create is one of the biggest values that we have been focused on. It's in our priority list as number, you know, in the top 10 for sure. Sustainability priority is really up there, which is why you've heard us talk about it, you've heard my CEO talk about it, Bracken. And that's where it comes from. We also see another thing which is somewhat obvious as well: in the future, unsustainable brands are going to die. When you go out to buy as a consumer, you are looking for more sustainable brands, and we also think this is something that companies have to do. It's definitely a call to action for a lot of us to do this from a personal perspective, but also from a business perspective, we want to make our brand sustainable because that's what our consumer research has shown: those are things that resonate well. And it's definitely something that we see the industry shifting towards. There's more awareness on this topic, and you can start seeing, as you pointed out earlier, a lot of companies now starting to think about it in this way, in part because consumers are more aware of where sustainability is and how important it is in their purchasing choice.

For sure. I mean, there are always challenges on time and resources on anything. I think those are the two things that probably define most of the challenges most companies have. So I'm sure if you went in any company setting and looked at sustainability programs and perhaps where they stall a little, it's when it gets to time and resources. So that's why we have actually chosen to make this part of our operations and pervasive enough that it is part of everyone's job. So that's really been a big learning for me, in actually making sure that this is not something done in an ivory tower somewhere, but something that's woven into the products you make, into your operations, into the kind of marketing you do, all of that type of stuff. So we've had challenges. I would say perhaps nothing that was not difficult to overcome. The biggest challenges I think remain technological challenges: how do you make electronics more sustainable, and how do you find enough industry folks that can come together to solve this problem? Because we're still a small company, and we really need to join forces with some key strategic folks that are thinking like this to come up with sustainable materials, new ways of making these products. I think that's really where the challenge has been: how do we unlock this quickly enough that we can get down this glide path to reducing the impact of carbon on our products?

So, the great thing about supply chain partners is they're part of my remit, which is part of operations. So my sourcing team is actually the ones talking to them. We've made this a part of their quarterly business review process. So we've talked to our suppliers and said this is really important to us. We've been doing that over the number of years on labor rights, human rights, working conditions, environment, all that sort of stuff. We've been doing that for a number of years. But in the last couple of years, we've added this particular prism of looking at climate action: how you as a provider of a chipset or a manufacturer or someone doing packaging, how are you impacting it? And really starting that conversation not in a punishing way but in an enabling way to share with them our numbers that we've collected on: here's the carbon impact that you're crossing, what can you do about it? Here's potential levers that you could pull to reduce the carbon. So we've really had that as part of our QBR and a focus on a strategic level. Every year I have a meeting with all my suppliers and partners, and we talk to them and say, 'Hey, this is an important thing.' And we made it a priority, Tom. I think that's the simple answer. If you make it a priority, a lot of things actually fall in place. It starts there. If you make it a priority, you can actually impact quite a few things that you thought were not possible. Because let's face it, we don't have all the answers. Our partners might run their business better; they know better how to run their business. So sometimes we're not going to them prescribing 'Here's what I want from you,' but we're going to them prescribing 'Here's the impact you're having. We would like you to improve that impact. We don't know exactly how, but here are a few ideas, and let's brainstorm on how we can help you.'

Yeah. For sure, the carbon label that we started off talking about— we've developed the carbon logo. If anyone wants to use it, we would happily lend it to them. If they want to understand how we do life cycle carbon analysis, again we're happy to engage. As a matter of fact, I've engaged with a few others not in our industry segment. We've come out openly and said, if competitors want to know how to do this, I'm happy to entertain those conversations. Because this is not about Logitech trying to win something. This is coming from a place where we genuinely think we want to have an impact on the total amount of carbon that companies like us produce and to reduce that, and I think we can do this together better.

Well, that's great firstly. That 15% think about it often or every time? Actually you said 15% every time? And then often/sometimes? So 45% think about it often or every time. So we just need to work on the remaining 55% to convert them. That's the work we've got cut out. It's really encouraging to know that quite a few people are thinking like this. And I think this is becoming a topic. My prediction, Tom, and you can check back in five years, if we did this poll again in five years, I hope that answer is 'often all the time' maybe 80% of the time. I still think there will be some folks that might look at value more than other things, but yeah.

Thank you. Bye-bye.